Feenaughty v. Beall

• Decision Date: 18 February 1919
• Citation: 91 Or. 654,178 P. 600
• Parties: FEENAUGHTY ET AL. v. BEALL ET AL. [a1]
• Court: Oregon Supreme Court

178 P. 600

91 Or. 654

FEENAUGHTY ET AL. v. BEALL ET AL. ^[a1]

Supreme Court of Oregon

February 18, 1919

Department 1.

Appeal from Circuit Court, Multnomah County; E. V. Littlefield Judge.

Suit by W. O. Feenaughty and others against John S. Beall and others. From decree rendered, defendants appeal. Reversed, and suit dismissed.

The people and concerns involved in this litigation are here named: Coast Culvert & Flume Company was a corporation engaged in the manufacture and sale of iron culverts and flumes; Multnomah Iron Works was another corporation engaged in the manufacture of machinery and tools; Beall & Co. afterwards called Hodson-Feenaughty Company, was originally a concern engaged in the jobbing business and particularly in selling the products of the Coast Culvert & Flume Company John S. Beall and his brother, E. H. Beall, held the controlling interest in the stock of Beall & Co., amounting to 343 shares out of a total capital stock of 500 shares. On January 17, 1914, John S. Beall and E. H. Beall made the following proposition to the plaintiffs, which for convenience, with the plaintiffs' subscribed acceptance thereof, will be called "Exhibit A":

"Messrs W. O. Feenaughty, C. W. Hodson, and E. L Thompson--Gentlemen: This confirms our verbal agreement with you, which we now understand to be as follows, and to more distinctly designate the various interests, we will call the existing organization of Beall & Co. 'Beall No. 3,' and the new purchasers of Beall & Co. 'Beall No. 4':

"We will sell you our interests in Beall & Co. No. 3, consisting of 243 shares of stock, of the par value of $100 per share, held by J. S. Beall, and 100 shares of stock held by E. H. Beall, for par plus 25 per cent. as a premium, the capital stock being $50,000, consisting in assets of merchandise, freights paid on consigned goods, furniture, and fixtures. Any shortage that may appear between the inventory values and the capital stock will be made up in the transfer of guaranteed accounts receivable from Beall & Co. No. 3 to Beall & Co. No. 4.

"It is further understood that $12,500 of the amount that Beall & Co. No. 4 pay as a premium to Beall & Co. No. 3 for this stock is to be applied by Beall & Co. No. 4 on $23,000 indebtedness of Beall & Co. No. 3 held by Ladd & Tilton Bank; Beall & Co. No. 3 to pay the balance of this indebtedness of approximately $10,500 to Ladd & Tilton.

"The payment of the above named $34,300 to be made to ourselves shall consist of $20,000 in cash from C. W. Hodson; $5,000 in securities evidenced by payment from W. O. Feenaughty; $9,300 in securities evidenced by contracts from E. L. Thompson.

"It is expressly understood that the prices used in making up the inventory of merchandise, furniture, and fixtures, etc., are to be the same prices we used in last inventory of Beall & Co. No. 3.

"It is also understood that, if this proposal is accepted by you, the transfer of this business shall be made as of date January 19, 1914.

"John S. Beall.

"E. H. Beall.

"We accept the above as satisfactory:

"W. O. Feenaughty.

"C. W. Hodson.

"E. L. Thompson."

On the 26th day of the same month John S. Beall and E. H. Beall signed the following writing:

"Messrs. W. O. Feenaughty, C. W. Hodson, and E. L. Thompson--Gentlemen: In consideration of your purchase of the interests of ourselves in the company known as Beall & Co., engaged in the road-making machinery and contractors' machinery and supply business, we hereby agree to use our best endeavors to personally further the interests of Beall & Co. at any and all times.

"We further agree that we will not enter directly or indirectly into any organization or individual connection in the same line of business in or about Portland or this territory whereby the interests of Beall & Co. will be in any measure interfered with."

It is alleged and admitted that at all the times mentioned in the complaint John S. Beall was the president and general manager of the defendant Coast Culvert & Flume Company, and owns and controls a majority of the stock thereof, and that he was a stockholder in and president of the Multnomah Iron Works. With their previous holdings, the sale of the stock in Beall & Co. to the plaintiffs gave them the ownership of all the shares in that concern, and it is alleged they still own them. After reciting these matters, pleading the sale of the stock according to legal effect and setting out in full the writing called "Exhibit C" and appending to the complaint a copy thereof, the plaintiffs declare their grievance in this language:

"That the said John S. Beall, in violation of his said agreement, and with intent to injure and destroy the business of the Hodson-Feenaughty Company, owned and controlled exclusively by plaintiffs herein, on or about the ______ day of ______, 1916, acting through the defendant Coast Culvert & Flume Company, as its president and manager, entered into a contract with defendant Multnomah Iron Works, of which corporation defendant John S. Beall is a stockholder and president, for the manufacture and construction of a road tool, designated as the 'Jarmin road fixer,' which when constructed was designed for the smoothing and repair of roads and highways, and which said road tool will come in active competition with road tools and implements and apparatus carried and sold by the said Hodson-Feenaughty Company, and which said road tools are now being manufactured and some completed, for the said Coast Culvert & Flume Company, by the said Multnomah Iron Works, under said contract.

"That the said defendant John S. Beall, acting through the medium of the Coast Culvert & Flume Company, and as its president and manager, has entered into contracts for the sale of said road tool, the 'Jarmin road fixer,' to customers of the Hodson-Feenaughty Company within its district, which comprises the states of Oregon, Washington, and Idaho, and has entered into a contract with the county of Gilliam, in the state of Oregon, for the sale of one 'Jarmin road fixer' machine, and has entered into a contract with the county of Sherman, within the state of Oregon, for the sale of five 'Jarmin road fixer' machines, all of which said machines are designed for road repair, and come in competition with the mechanical devices sold by said Hodson-Feenaughty Company, which accomplish the same purpose for which the said 'Jarmin road fixer' machine is designed, and the said defendant John S. Beall, acting through the said defendant Coast Culvert & Flume Company, is threatening to, and unless restrained by your honorable court will, manufacture or cause to be manufactured other 'Jarmin road fixers,' and will offer the same for sale and sell the same in the territory heretofore, on the 17th day of January, 1914, sold to the said Beall & Co., to the irreparable damage to plaintiffs herein."

In addition thereto they count upon a similar action by Beall in respect to metallic road signs.

A general demurrer by John S. Beall to the complaint, and on the ground that "neither Beall & Co. nor E. H. Beall was made a party," was overruled. A similar demurrer by the Coast Culvert & Flume Company and the Multnomah Iron Works, and for the further reason that neither of them was party to the contract declared upon, and that it is too vague and indefinite to authorize a court to grant equitable relief in the premises, was also overruled. Afterwards E. H. Beall was made party by interlining his name, but the allegations of the complaint were not changed in any respect. His demurrer, similar to those already noted, was also denied. The corporate defendants answered, defending principally upon the ground that they were not parties to the transaction and were not bound by the action of John S. Beall, although he is one of their stockholders. As a common feature the answers point out that the writing upon which the plaintiffs count was executed after the sale of the Beall stock and as a separate transaction, and that the purchase of those shares constituted a "past consideration," making the instrument ineffectual for want of consideration. They further contend that the "Jarmin road fixer" is a contrivance the sale of which does not interfere with any of the business of the corporation Beall & Co. or of its successor, Hodson-Feenaughty Company. The answers of the Coast Culvert & Flume Company and Multnomah Iron Works contain an additional feature to the effect that besides John S. Beall there are other stockholders in those concerns, who never had any knowledge or notice of the alleged agreement upon which the plaintiffs rely in this suit. It is said by the Multnomah Iron Works also that John S. Beall is the owner of a minority of its stock, but is not the manager or in any manner in control of its business.

In the reply issue was joined upon certain matters of the answers. The result of the hearing by the court was a decree enjoining the two Bealls from interfering in any manner with the customers or trade of the Hodson-Feenaughty Company or from soliciting or selling, or attempting to sell or causing to be sold, any of the road tools, road signs, road machinery, or other articles or machinery, which were kept or sold by Beall & Co., either directly or as agents for manufacturers or others, on or prior to January 17, 1914, in the states of Oregon, Washington, and Idaho, and from acting as selling agent for any other person, firm, or corporation for the sale of such merchandise as was kept and offered for sale by Beall & Co. at the date of the contract. The decree further restrained the Bealls from acting as selling agents for the Multnomah Iron Works, and from causing that concern to manufacture any of the "Jarmin road fixers" or road signs, or any other tools,...